On Friday the Full Court of the Federal Court of Australia handed down its long awaited decision in the matter of Commissioner of Taxation v Hunger Project Australia . The case concerns the operations of Public Benevolent Institutions (PBIs), and in particular whether PBIs are required to provide direct relief to persons in need, and cannot therefore engage in unrelated commercial activities in the pursuit of that purpose. Hunger Project’s principal activity was to accrue funds through the activity of fundraising. The Full Court held that despite the activity being limited to fundraising and not direct relief, Hunger Project Australia was a public benevolent institution for taxation purposes.
The Court’s reasoning on the question of whether the meaning of ‘PBI’ has altered over time is summarised in the following excerpt from the judgement (at -):
In our opinion, whilst there is no single or irrefutable test or definition, the ordinary meaning or common understanding of a public benevolent institution includes…an institution which is organised, or conducted for, or promotes the relief of poverty or distress. To adapt the words of Priestley JA in ACOSS, such an institution conducts itself in a public way towards those in need of benevolence, however that exercise of benevolence may be manifested. The ordinary contemporary meaning or understanding of a public benevolent institution is broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a public benevolent institution. Such an institution is capable of being considered to be an institution organised or conducted for the relief of poverty, sickness, destitution and helplessness.
The decision essentially overturns the Australian Tax Office’s long-standing interpretation that PBIs are required to provide direct relief. Consequently charities that have been refused endorsement as a PBI on that ground, or have not considered seeking endorsement for that reason, may wish to consider an application for endorsement. It is to be noted that we are yet to see whether the matter will be further appealed to the High Court of Australia.
DISCLAIMER: This update contains general information only. It is not all inclusive and should not be considered legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.